Silent on the real problem: Even as senators quizzed JP Morgan’s Jamie Dimon about his losses, he was mum about the muni-market mess.Reuters

While the Senate Banking Committee last week spun its wheels trying to get JP Morgan chief Jamie Dimon to admit to something nefarious during testimony about his “London Whale” trading loss, executives at the big bank were concealing a far bigger scandal.

OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits.

Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states.

The scandal isn’t simply that most public officials are misleading the public about the enormity of the problem and what steps must be taken to address the matter. As the Morgan report notes, many of the real liabilities are located “off balance sheet,” hidden from the public’s eye, and lax accounting standards let cities and states minimize their enormity.

It’s also that JP Morgan itself kept the report’s findings a secret except for a few big clients, mostly hedge funds and large institutional investors, who got the inside tip on which states and cities are most likely to default on their debt as their pension liabilities fester.

Yes: Default is a very real possibility, because the solutions are far from easy.

Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900-plus billion that officials are ’fessing up to. That’s right, the bank sees a $3.9 trillion hole; to plug that, states and cities will need large tax hikes, massive budget cuts or both. Plus, public-sector unions will have to accept smaller retirement packages, and later retirement ages, to keep the pension systems going.

Without these steps, states and cities with the biggest holes face possible insolvency and default, though the bank believes the risk of default “is greater for municipalities than for states.”

Many of the places facing the biggest pension liabilities are right here in the Northeast, where big government rules and public unions are such a potent political force that officeholders dish out gold-plated benefits.

But the classic big-government answer, taxing the rich, won’t solve this problem. Nor can these municipalites simply count on high returns on investments bailing them out, the report warned, since markets don’t always go up.

In New York, for example, JP Morgan said state officials would have to immediately cut spending by 12.3 percent or raise taxes on everyone by 7.4 percent. And they’d need to make these tax hikes and budget cuts permanent for the next two decades to fully fund public-employee pensions.

New Jersey faces an even bigger hole. Even after Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem.

I got my hands on the report not from an disgruntled employee looking to even up the score with his old firm, but from someone who believed the reason JP Morgan kept it a secret stinks to high heaven: Bankers there are afraid of upsetting state and city officials who hand them large fees to underwrite municipal bonds.

Keep in mind, JP Morgan is Wall Street’s leading underwriter of municipal debt. A public release of the report might anger big Morgan muni clients such as Massachusetts, which has a large pension liability.

And why draw attention to an issue that might spook investors, cut off funding for municipal governments and for the fees the bank collects on that funding? A muni-market panic could land the bank in far hotter water than its current London Whale travails.

But Morgan’s discretion may have broken the law: The report’s dire predictions didn’t make it into investor-disclosure documents on at least some bond deals that Morgan underwrote for states with the biggest liabilities. Legal experts say that could violate federal anti-fraud statutes.

All of which sounds like far more onerous than anything the Senate Banking Committee could come up with last week: It grilled Dimon over $2 billion trading loss at his London office, while his firm was hiding evidence of a $4 trillion pension disaster.